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Workers Rely on 401(k) Providers for Retirement Advice: Cerulli

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A 401(k) provider is most often the primary source for retirement advice among retirement plan participants, according to recent data from Cerulli Associates.

Across all ages, Cerulli finds that 29% of retirement plan participants cited their plan provider as their primary retirement advice source.

Cerulli’s report, U.S. Retail Investor Products and Platforms 2015: Harnessing Investor Sentiment, is based off an ongoing survey of more than 10,000 U.S. households annually in partnership with Phoenix Marketing International.

Also notable is that Cerulli finds that 17% of the respondents indicate relying on no source for advice at all.

“While some of these individuals may possess the detailed knowledge necessary to complete their own analysis independently, many are likely unaware of the resources at their disposal,” states the report. “Despite plan sponsors’ fiduciary obligations to educate their participants, many do not receive these sources, especially within smaller employers without the ability to dedicate resources to these efforts.”

Respondents under 30 cited family, friends or colleagues (26%) as their primary retirement advice source.

“Lacking a degree of trust in any other available sources, these participants instead seek advice from individuals that have proven reliable in other aspects of their lives,” according to the Cerulli report.

The study finds that reliance on one’s social network of family and friends for retirement advice decreasing dramatically with age, from 26% of the under-30 crowd to 18% of 30- to 39-year-olds, 13% of 40- to 49-year-olds, 5% of 50-59 year olds, and 2% of 60- to 69-year-olds and participants over 70, respectively.

Perhaps this rapid decline is because as people age, more of them rely on a financial advisor or a financial planner.

Among participants under 30, just 9% rely on a financial advisor and 6% rely on a financial planner. In contrast, 20% of the over-70 crowd relies on an advisor and 19% rely on a planner.

The study also finds that there is some dissatisfaction among plan participants and their providers — especially among those on the cusp of retirement, in the 50-to-59 age range.

“Investors ages 50-59 are facing a crucial juncture in their retirement planning journey, yet are most likely to report dissatisfaction with their current providers,” according to Cerulli. Scott Smith, director at Cerulli, told ThinkAdvisor that this disappointment provides an opportunity for wealth managers.

“The main challenge of the 50-to-59 market is that they are finally taking retirement planning seriously and many find themselves disappointed  with regards to what their current saving will generate in retirement income as well as what they will need to do to remedy the situation in the next 10 to 15 years,” he said.

According to the Cerulli report, providers targeting this 50-59 age segment must reinforce the satisfaction of their current advice recipients. The report also cites this as an opportunity for providers to recognize how easy it can be for their clients to change providers if they are engaged in outreach efforts.

“The disappointment of these investors creates an opportunity for wealth management providers to displace incumbents, but to meaningfully impact investor outcomes they will need [to] install themselves as long-term financial coaches instilling a strong savings discipline among investors,” Smith told ThinkAdvisor. “It’s not easy or short term but could prove fruitful for both investors and wealth management providers.”

— Check out How Alicia Munnell Messed Up, and Then Saved, Her Retirement  on ThinkAdvisor.